Chesham a victim of Iceland collapse

The world's oldest building society is set to disappear from the High Street forever after becoming the latest victim of the Icelandic banking crisis.

Icebound: Chesham is the latest to fall after depositing money with Icelandic banks.

The Chesham, founded in 1845, yesterday announced it was to merge with Britain's fourth biggest building society, Skipton.

With assets of just £230m the Chesham had suffered a loss of £1.9m in its last results after losing £3m invested in Heritable Bank, part of failed bank Landsbanki.

It has also had to cope with an estimated £490,000 bill for the Financial Services Compensation Scheme (FSCS).

The merger with Skipton, which will take effect on June 1 if approved, will see the Chesham gradually disappear.

Existing savings accounts will keep the Chesham name until customers close them, while its three branches will remain open for at least 12 months. There will be no compulsory redundancies.

The Chesham has 21,000 members, of whom 2,000 are mortgage borrowers. They will be able to use Skipton branches after the merger.

This is Money says: Although it is regrettable Chesham has fallen victim to the Icelandic collapse, this is only good news for its members. Now that it is part of the Skipton behemoth, they should be able to benefit from higher savings and lower borrowing rates, in theory.

It is a shame that the brand will probably disappear, however, and the process does not bode well for the country's smaller building societies, which are buckling under the pressure of payments to the FSCS.

All Chesham members will retain their £50,000 savings compensation coverage and this will remain separate from Skipton's, so a saver with money in both will be covered up to £50,000. There was an anomaly in the merger of Scarborough and Skipton last year: the separate protection offered to Scarborough members was limited to the amount of money they had with the society prior to its merger with Skipton. So if they put in extra money to their account post-merger, it would fall under the Skipton banner. It is unclear at this stage whether this will also be the case with Chesham.

As Chesham has been effectively rescued from the brink by Skipton, members are unlikely to receive a windfall payment.